(Bloomberg) — An exchange-traded product tied to declines in the oil market just saw its biggest outflow of funds since 2020. With crude prices crashing to a four-year low, some investors pulled out of the fund to cash in on profits.
Oil has been hit by the one-two punch of OPEC+ choosing to ramp up output hours after US President Donald Trump last week unveiled a spate of trade policies that were especially punishing to major crude-importing economies, including China and India. Futures in New York on Wednesday were on track for a fifth session of losses and are trading near the lowest levels since 2021.
Some investors are growing wary over how much further prices will fall and have chosen to cash in on their bearish bets. The ProShares UltraShort Bloomberg Crude Oil ETF, an exchange-traded product that seeks to return twice the inverse of the daily performance of its underlying index, saw an outflow of $72.2 million on Monday, according to fresh data. That’s the biggest net-withdrawal since markets cratered at the beginning of the Covid pandemic.
The ETF also saw a $19 million outflow the following day, marking the largest two-day decline since 2011.
Meanwhile, inflows for the United States Oil Fund, the largest ETF tracking the price of oil, surged on Friday by $275 million to the highest levels since 2020. It posted an outflow of $98.7 million in the following session.
Recent dramatic price moves have lured investors of all stripes back to the crude market after an extended period of depressed trading. Crude markets saw an $11.6 billion net inflow in the week ending April 4, JPMorgan Chase & Co. analyst Tracey Allen wrote in a note to clients. Open interest across the WTI futures curve has also surged in recent sessions to the highest in over three months.
In ETF trading, individual investors have made it a habit to leverage economic downturns to skim profits off of security basksets that can be bought and sold via amateur-friendly single trades. A massive influx of these so-called oil tourists contributed to briefly pushing US crude into negative territory at the onset of the global pandemic. Just recently, as escalating tensions in the Middle East threatened to curtail global flows, retail traders poured money into the USO fund.
Though opportunistic investors have traditionally gone for equities, the popularity of commodity-linked products has increased over recent times as retail brokers like Robinhood make it easier to place trades, according to Christina Qi, chief executive officer of Databento.
While that’s helped to reinforce liquidity, it’s also a portent of choppy trading. One measure of volatility jumped this week to the highest level since November.
